WASHINGTON, (Reuters) - U.S. retail sales increased by the most in 1-1/2 years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.
The Commerce Department said on Thursday retail sales surged 1.6 percent last month. That was the biggest increase since September 2017 and followed an unrevised 0.2 percent drop in February.
Economists polled by Reuters had forecast retail sales would accelerate 0.9 percent in March. Retail sales in March advanced 3.6 percent from a year ago.
With March's rebound, retail sales have now erased December's plunge, which had put consumer spending and the overall economy on a sharply lower growth trajectory. Retail sales last month were probably lifted by tax refunds, even though they have been smaller than in previous years, following the revamping of the U.S. tax code in January 2018.
Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 1.0 percent in March after a downwardly revised 0.3 percent decline in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
They were previously reported to have decreased 0.2 percent in February. Consumer spending accounts for more than two-thirds of economic activity, and strong core retail sales in March could result in the further upgrading of first-quarter GDP estimates.
Growth forecasts for the first quarter were boosted to around a 2.4 percent annualized rate on Wednesday after data showed the U.S. trade deficit narrowed for a second straight month in February.
First-quarter growth forecasts have been raised from as low as a 0.5 percent rate following fairly upbeat reports on trade, inventories and construction spending. The economy grew at a 2.2 percent pace in the fourth quarter.
A report from the Federal Reserve on Wednesday described the economic activity as expanding "at a slight-to-moderate pace in March and early April. The Fed's "Beige Book" report of anecdotal information on business activity collected from contacts nationwide showed a "few" of the U.S. central bank's districts reported "some strengthening."
Stronger growth in the first quarter will probably not change the view that the economy will slow this year as the stimulus from a $1.5 trillion tax cut package diminishes and the impact of interest rates hikes over the last few years lingers.
In March, sales at auto dealerships jumped 3.1 percent, the most since September 2017. Receipts at service stations increased 3.5 percent, likely reflecting higher gasoline prices. Sales at building materials and garden equipment and supplies dealers rose 0.3 percent.
Receipts at clothing stores shot up 2.0 percent, the largest increase since last May. There were also increases in sales at furniture outlets, electronics and appliances shops, and food and beverage stores.
Online and mail-order retail sales increased 1.2 percent last month. Sales at restaurants and bars rose 0.8 percent, the most since last July. But receipts at hobby, musical instrument and book stores fell 0.3 percent.
(Reporting by Lucia Mutikani Editing by Paul Simao)
